Tesla (NASDAQ:TSLA) will host its Gigafactory grand opening this coming Friday (three months later than originally promised, which in Tesla time is way ahead of schedule).

I'm all in favor of festive gatherings. The Tesla faithful who trek to the Nevada desert are welcome to their hors d'oeuvres and Champagne.

I do raise an eyebrow, though, at fibs. The fibbing already has begun:

"We have to be ready with cell and pack production well ahead of vehicle production," JB Straubel, Tesla's chief technical officer and co-founder, said during a walk-through of the factory. "We're accelerating our construction plans and accelerating our planned ramp up of cell production."

As detailed below, the notion that Tesla is accelerating construction plans is, to say the least, imprecise.

Tesla may be speeding up construction on the eve of the party, but for the past year it has been dawdling at a slow crawl. Tesla is far behind the construction schedule it originally promised.

Click to enlarge

The Gigafactory gala is likely to be the occasion for Tesla to make extravagant claims, confident that its pliable media mouthpieces will rebroadcast them uncritically.

(And look how quickly it begins. See, for instance, here and here, where, as so often happens with Tesla, stenography masquerades as reporting.)

So, as we brace for the tsunami of Gigafactory falsehoods about to be unleashed, let's review the facts.

Fact 1: The Gigafactory is not a fully-integrated battery plant.

When in 2014 Tesla announced the Gigafactory, it promised the plant would be a fully-integrated manufacturing facility, starting with "precursor" materials such as aluminum foil, copper foil, separators and other electrode components, and emerging with fully-assembled battery packs.

Click to enlarge

(Tesla's February 2014 flowchart showing a fully-integrated battery manufacturing facility. The reality will be much different.)

It assured investors that a dozen or more sub-suppliers would locate at the factory, and that putting all of its "partners" (as Tesla called them) under one roof would result in massive cost savings, thereby paving the way for a 30% cost reduction in batteries.

It's now evident that when cell manufacturing begins at the Gigafactory, the only parties on board will be Panasonic (OTCPK:PCRFY) and Tesla. Instead of being supplied by a dozen or more sub-suppliers on site, Panasonic will ship the cell components across the Pacific Ocean and then haul them over the Sierra Nevada mountains and through the brown Nevada desert.

Fact 2: The Gigafactory is far behind schedule.

Under the 2014 Incentive Agreement, Tesla secured from the State of Nevada a $1.3 billion package of benefits including tax breaks, transferable tax credits, free land and roadway construction.

To induce Nevada to grant these benefits, Tesla submitted an Application that ultimately became part of the Incentive Agreement.

In the Application, Tesla divided the Gigafactory construction into five phases, and stated all five would be built by October 2017. Tesla also outlined the expected construction progress, month-by-month.

What's actually been built? Only Phase 1. Tesla has not even begun to build any other phase. (Scratch that: as Paulo Santos reports today, just in time for the Gigafactory festivities, Tesla has erected a Potemkin village of construction equipment.)

Some Seeking Alpha commenters here are fond of parroting Tesla's story that the Gigafactory is on schedule. The schedules in the Incentive Agreement, however, tell a different story. (See page 56, here.)

So, too, does Tesla's Gigafactory Projected Timeline (see page 5, here), which it published in 2014, shortly before it issued $2.3 billion in convertible bonds with the promise (since broken) that the lion's share of proceeds would be used for Gigafactory construction.

Click to enlarge

(Per Tesla in February 2014, the entire factory structure would be in place by now. Reality: only 1 phase out of 5 is complete.)

State of Nevada officials, rather than being honest with their constituents, have pretended Tesla's progress is "satisfactory." That is, of course, what politicians generally do, too: dodge responsibility for their failures.

But the Incentive Agreement says what it says, and what it says is that Tesla has not even come close to meeting its schedule.

Still don't believe Tesla promised to finish the entire five phases by October 2017? Then please note that, as part of its application, the State of Nevada required Tesla to secure letters of recommendation from local officials. You can read the one from the Economic Development Authority of Western Montana (EDAWN) at page 44, here:

Click to enlarge

***

Click to enlarge

Three years from October 2014 is October 2017. Who told Stan Thomas, EDAWN's Executive Vice President, that it would all be done in three years? Tesla, of course.

If Stan were a honest politician, would he be complaining about being lied to? Of course he would.

My bet, though, is that Stan's an honored guest at Friday night's gala.

Fact 3: Tesla has spent only a tiny fraction of what it promised the State of Nevada.

Tesla promised Nevada total capital expenditures of $5 billion, or about $1 billion per phase. The number was divided between Gigafactory structure ($1.1 billion) and equipment ($3.9 billion).

And, remember, under Tesla's schedule, all this money was to have been spent by next October.

How much have Tesla and Panasonic actually spent? Through March 31, which is the most recent date for which we have data, only $508 million.

The Q2 spending update, due in August, no doubt will reflect further equipment expenditures (mostly by Panasonic), but the total will not come close to even $1 billion.

Fact 4: Tesla has broken its employment promises.

Tesla's Application also shows 300 full-time Gigafactory employees by June of 2015 and 2,000 by June of 2017. There is no June 2016 figure given, but if we interpolate, the number would be more than 1,000.

The most recent report filed by Tesla with Nevada officials showed a combined total of 369 employees as of March 31.

I have no doubt that when the latest update appears in August, it will reflect far fewer than 1,000 full-time Gigafactory employees.

(Yes, Tesla has recently spoken of the number of construction workers on site "reaching" 1,000. But even if 1,000 actually is "reached," those are construction workers, not full-time employees. The construction work is far behind schedule because Tesla has been employing far fewer construction workers than it promised.)

Rather than spend money on "renewable" energy installations, Tesla instead secured, as part of its incentive package, a long-term reduction in electrical rates. (Nevada residential ratepayers will pay more so that Tesla can pay less.)

With bargain electrical rates coming predominately from coal-burning power plants, Tesla has little incentive to install the promised solar and wind equipment any time soon.

Tesla also promised that it would recycle batteries at the Gigafactory. To date, no such recycling activities have been undertaken, and, indeed, Tesla has never demonstrated how lithium ion cells can be economically recycled.

Like battery-swapping, Tesla's battery recycling is simply another fairy tale for the credulous.

Fact 6: Tesla won't achieve any battery cost savings.

There is no evidence that the Gigafactory will reduce Tesla's battery costs.

As noted earlier, the promised vertical integration has not materialized.

Nor has Tesla achieved any breakthrough in battery chemistry.

Also, there's no reason to believe it's cheaper for Panasonic to manufacture cells in Nevada than in Asia.

If anything, the Gigafactory may actually increase Tesla's costs, as Tesla now will have to recover, in its auto pricing, the huge expense of the factory.

Fact 7: The Gigafactory was a dumb idea.

I'm forever hearing about what a visionary genius Elon Musk is.

What kind of visionary genius disables his firm from the ability to source batteries from a host of potential manufacturers and from being nimble in changing battery architectures and chemistries?

What kind of visionary genius weds his firm to a single supplier by means of a long-term battery supply agreement that guarantees the supplier full recovery of its investment plus a stipulated return?

Tesla contracted to buy 1.836 billion of Panasonic's 18650 cells for the Model S and Model X. Tesla must complete that purchase by the end of 2017.

It's now apparent that, unless it continues to slash Model S and Model X pricing, Tesla will not have nearly enough car sales to meet that minimum obligation.

Several months back, Seeking Alpha contributor Modis wrote a superb piece detailing why he believes Tesla is making a terrible mistake in wedding itself, with the Gigafactory, to thin film lithium ion batteries.

Modis makes a powerful case. I have yet to read a persuasive counterargument.

Carlson teases the Teslarians with the prospect of "Christmas in July" - the prospect of Tesla unveiling, on the occasion of this week's Gigafactory grand opening, some extraordinary breakthrough in battery technology.

Carlson started by noting how astonishingly vague have been Tesla's promises about how the Gigafactory will reduce battery costs:

Aside from generalities like 'saving on shipping' and 'streamlining production' Tesla hasn't told us much about how the Gigafactory works."

I wholeheartedly agree with Carlson's introduction. My misgivings arise only as he proceeds.

Carlson detailed how he believes Tesla will accomplish the cost savings. He envisions "dynamic cell balancing" technologies and Tesla's use of air cooling for its Model 3 batteries.

The impressive result: a 20% cell cost reduction and a 25% savings on battery-related capital expenditures.

Let's give Carlson his due. His article is impressively researched, meticulously detailed and beautifully illustrated. But, as I read it, I wondered: why, if Tesla has achieved such a breakthrough, has it not have announced it?

Is Tesla typically so shy? Is Elon Musk by nature so modest?

Did Tesla wish to suppress its share price when it raised capital in May? Did Musk wish to dampen enthusiasm for his SolarCity (NASDAQ:SCTY) acquisition proposal?

Click to enlarge

No, the Carlson conjecture didn't pass the common sense test, but then I'm no electrical engineer or battery expert, so I was interested to see what other commenters, who possess genuine technical expertise, had to say.

It turns out those others were uniformly dubious. Notably, several of these dissenters (JRP3, doubleE, JackBowers) are Tesla enthusiasts who almost always disagree with me.

Here's a sampling from the comments:

chipdoctor

Seeking Alpha commenter chipdoctor, who has spent his entire career working with computer chips, believes active balancing would add significant cost to the Model 3 and reduce overall pack efficiency. Even worse, it would sacrifice the fast-charging advantage Tesla has with its liquid cooled batteries.

a1smith

In several lengthy and learned exchanges with Carlson, a1smith identified many faults with Carlson's imagined design, including a problematic air flow path that would exacerbate rather than ameliorate cell balancing issues.

JRP3

Hate to say it but I agree with Chipdoctor on this one. Randy's reasoning is really off the rails here.

doubleE

[M]y layman's understanding of thermal engineering is dubious of the combination of higher energy density cells and air cooling.

JackBowers

Almost everything that Tesla is trying to do hinges on liquid cooling, including the cables used at future Supercharger stations. I find it hard to believe that they would take a giant step backward and embrace the kind of substandard engineering that Nissan uses in its pack design.

embers was in awe of Carlson's Monte Carlo simulations and detail. He was intrigued by the possibility that Panasonic has achieved a cell voltage in excess of 4.3 volts. He found it possible to imagine Tesla will embrace dynamic balancing.

However, embers was highly doubtful Tesla will use air-cooling. His skepticism is underlined by his experience leading a design team for the electronic components of the cruise missile:

The various guidance components are mounted on a 1/2" plate with channels inside it. We looked at a solid heat sink, using air and using a liquid (in this case fuel) to cool the guidance system.

Using free flowing air cannot get you the heat transfer you need. You will need at least 2, preferably 3 atmospheres in a sealed system. We went with liquid.

I realize some SA commentators may question the missile analogy vs a car but it's heat and it's electronics - car or missile the laws of thermodynamics do not care.

Conclusion

So, after all the carpaccio and caviar are washed down with Cabernet and Viognier, just remember these important facts about the Gigafactory:

The Gigafactory is much smaller than promised.

No "partners" have signed on to locate there.

The Gigafactory won't be vertically integrated.

The Gigafactory won't reduce Tesla's battery costs.

In pretending Tesla's progress is "satisfactory," while swilling Chardonnay with the uber-wealthy and rubbing elbows with Elon, Nevada politicians are continuing to betray their constituents.

A Note About My Contributors

Special thanks this time to embers, notasmidgeon, and investor.gator. None of them is responsible for my errors or necessarily agrees with all points of my analysis.

Email & Twitter

On Twitter, I am @MontanaSkeptic1, and my email address is Montana.Skeptic@gmail.com.

Disclosure:I am/we are short TSLA VIA LONG-DATED PUTS.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.